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TMI Blog2023 (11) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Officer having jurisdiction in the matter there is nothing in law that stops that officer from adjudicating the notice. Neither is the principle of natural justice violated. In fact, the initial officers mentioned in the section were Deputy Commissioner / Assistant Commissioner which was replaced by the words Central Excise Officer - The words the preceding Central Excise Officer thus stands for the Central Excise Officer who is empowered to issue a notice / adjudicate the matter as per law. It clearly excludes any other Central Excise Officer from doing the same and hence the phrase the Central Excise Officer appears both in Section 73(1) (2) of FA 1994. Hence it is clear that both the SCN and the impugned order does not suffer from the vice of jurisdictional error - there are no merit in this argument. Mining Service - Exigibility of minor mineral - In relation to mining alone is taxable - Constitution exempts the property and income of a State from Union taxation - Sand is excisable goods classifiable under Central Excise Tariff Heading 2505 and can t be taxed under service tax - The sand is sold hence VAT is applicable and not Service Tax - The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered under the taxable service as defined under Section 65 (105) (zzzy) of FA 1994. Sand is excisable goods classifiable under Central Excise Tariff Heading 2505 and can t be taxed under service tax - HELD THAT:- The Hon ble Supreme Court in IN RE: THE BILL TO AMEND S. 20 OF THE SEA CUSTOMS ACT [ 1963 (5) TMI 57 - SUPREME COURT ] has contrasted sales tax with excise duty and observed that in case of sales tax, the taxable event is an act of sale. Therefore, though both excise duty and sales-tax are levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production while in the other it is on the act of sale - As per the facts of this case the appellant is engaged in rudimentary processing of goods which is not amounting to manufacture or production of goods and is a taxable service in relation to mining, hence they are liable to pay service tax. The sand is sold hence VAT is applicable and not Service Tax - HELD THAT:- The taxable event is each exercise / activity undertaken by the service provider and each time service tax gets attracted. Hence it is possible to distinguish service tax from VA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of FA 1994, where service tax is not separately recovered from the customer, the cum-tax benefit shall be granted and the tax shall be excluded from the value of the service on which service tax is to be calculated. Hence if the benefit of cum-tax calculation has not been given by the department to the appellant the same should be given. Leasing services - HELD THAT:- In the case of vehicles supplied without a contract it was for the appellant to show the terms of engagement of vehicle by their clients, to the investigating officers. Both the customers of the appellant and Shri M Palaniswamy (appellant) in his statement dated 22/01/2015 have stated that no written agreements were executed in respect of the vehicles leased out for a short term. The appellant stated that they supplied their vehicles on a long-term basis to Shri A Senthil Kumar, Coimbatore and to M/s Senthil Kumar Building Materials Co, Coimbatore. Investigations by the officers at TAMIN revealed that the appellant supplied excavators and rock breakers at hourly rates to TAMIN. The appellant provided the operators for the machines, took care of the day-to-day repair and maintenance and also insured the vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption under Sl. No. 13 of Notification 25/2012 dated 20.6.2012. Extended Period not Invokable - HELD THAT:- In the present case, the period covered by the impugned order is from 2010 to 2015. The Show Cause Notice is dated 9.10.2015. Therefore, the maximum period upto which the demand can be imposed is only till October 2013 and the demand from 2010 to October 2013 merits to be set aside. There was never a suppression of facts to the department. Audit has been conducting periodical verification of accounts during the alleged period. They have been filing ST-3 returns and TR6 forms regularly in which they have disclosed all requisite information. Therefore, the extended period cannot be invoked. Suppressing these facts by not filing their complete Returns, even after having collected the tax from their customers, is a clear case of suppression of vital information with i7ntention to evade payment of duty. There is a positive act of suppression on the side of the appellant showing willful suppression on their part. Hence suppression of information with intention to evade payment of duty is established. In this era of self-assessment, the facts would not have been revealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax on the services rendered by them under the categories of Mining service , Supply of tangible goods service and Site formation service . Based on the investigations conducted by the department, the Additional Director General (ADG), DGCEI, Chennai issued Show Cause Notice dated 9.10.2015 proposing to demand service tax from the appellant. After due process of law, the adjudicating authority confirmed the service tax of Rs.8,74,99,061/- with interest under the head Mining Service ; Rs.60,54,133/- with interest for the services Site Formation, Clearance, Excavation, Earth Moving and Demolition Service and Rs.4,06,83,917/- with interest for Supply of tangible goods service . The adjudicating authority also imposed penalty of Rs.13,42,37,111/- on the appellant under section 78 of the Act and under section 77(1)(a) and 77(2) of the FA 1994. Aggrieved by the above order, the appellant is before the Tribunal. 3. No cross-objection has been filed by the respondent-department. 4. We have heard learned counsel Shri K. Sankaranarayanan for the appellant and Shri N. Satyanarayanan, learned AR for Revenue. 4.1 The learned counsel for the appellant submitted that sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... striction can be inferred on the powers of the Board while appointing the officers of the DGCEI to act as Central Excise Officers , and prayed that the impugned order be upheld. 5 We have gone through the appeal and heard the rival parties. The appeal raises a preliminary challenge to the jurisdiction of the adjudicating authority to adjudicate the matter. The other issues pertain to (i) quarrying of river sand, (ii) leasing services and (iii) site formation service. We shall take up these issues sequentially. All the issues taken up for consideration are listed below for ease of reference. S. No. Subject Para No. Page No. 1. Jurisdiction of the Adjudicating Authority 6 5 2. Mining Service 7 18 2(a) Exigibility of minor mineral 7.3 19 2(b) In relation to mining alone is taxable 7.4 22 2(c) Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84 edition, in Chap. 9: Jurisdiction over fact and law at p. 250 describes the narrow meaning of the term with great clarity, simplicity and terseness thus: In this area jurisdiction' is a hard workers word. Commonly it is used in its broadest sense, meaning simply 'power'. In some contexts it will bear the be technical difference..... . In this case, it would be necessary to apply the contours of jurisdiction to the adjudicating authority . Chapter V and VA of the Finance Act, 1994, as amended does not define the term adjudicating authority. However, section 65 B ibid stipulates that the for words and definitions used but not defined in Chapter V ibid the meanings defined in the Central Excise Act, 1944 can be applied to. As per the Central Excise Act, 1944 adjudicating authority means any authority competent to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963, (54 of 1963) Collector of Central Excise (Appeals) or Appellate Tribunal. Also, Central Excise Officer means any officer of the Central Excise Department, or any person (including an officer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise Officers are as per Rule 3 of the Central Excise Rules, 2002. Rule 3 states: RULE 3. Appointment and jurisdiction of Central Excise Officers- (1) The Board may, by notification, appoint such person as it thinks fit to be Central Excise Officer to exercise all or any of the powers conferred by or under the Act and these rules. (2) The Board may, by notification, specify the jurisdiction of a Chief Commissioner of Central Excise or Commissioner of Central Excise or Commissioner of Central Excise (Appeals) for the purposes of the Act and the rules made thereunder. (3) Any Central Excise Officer may exercise the powers and discharge the duties conferred or imposed by or under the Act or these rules on any other Central Excise Officer who is subordinate to him. Vide Notification No. 39/2001-Central Excise (N.T.) G.S.R. 468(E) Dated 26/06/2001, the Central Board of Excise and Customs in exercise of powers conferred by sub-rule (1) of rule 3 of the Central Excise (No.2) Rules, 2001, has appointed officers of Central Excise and invested them with all the powers of Central Excise Officers as specified in the Table given in the notification, to be exercised within suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onferred by clause (b) of section 2 of the Central Excise Act, 1944 read with sub-rule (1) of rule (3) of the Central Excise (No.2) Rules, 2001, the Central Board of Excise and Customs appointed and invested DGCEI officers (among others) as Central Excise Officers with all the powers, to be exercised by them throughout the territory of India, of an officer of Central Excise of the rank specified in the table to the said notification, with effect from 1st July, 2001. Notification No.38/2001-Central Excise (N.T.) 26th June, 2001 In exercise of powers conferred by clause (b) of section 2 of the Central Excise Act, 1944 read with sub-rule (1) of rule (3) of the Central Excise (No.2) Rules, 2001, the Central Board of Excise and Customs appoints the officers specified in column (2) of the Table below as Central Excise Officers and invests them with all the powers, to be exercised by them throughout the territory of India, of an officer of Central Excise of the rank specified in the corresponding entry in column (3) of the said Table, such powers being the powers of a Central Excise Officers conferred under the said Act and rules made thereunder with effect from 1st July, 2001. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Joint Director 5. Deputy Director or Assistant Director 6. Senior Intelligence Officer (Class I II) 1. Chief Commissioner 2. Commissioner 3. Additional Commissioner 4. Joint Commissioner 5. Assistant Commissioner or Deputy Commissioner 6. Superintendent 6. Officers of Directorate of Statistics and Intelligence, namely:- 1. Director 2. Joint Director 3. Deputy Director 4. Senior Research Officer and Senior Analyst 5. Assistant Director Research and Junior Analyst 6. Statistical Investigator (Senior Grade) 7. Statistical Investigator (Ordinary Grade) 1. Commissioner 2. Joint Commissioner 3. Assistant Commissioner or Deputy Commissioner 4. Assistant Commissioner or Deputy Commissioner 5. Superintendent 6. Inspector 7. Inspector 7. Officers of Customs in Export Processing Zones, Free Trade Zones or Special Economic Zones, namely:- 1. Commissioner 2. Additional Commissioner 3. Joint Commissioner 4. Assistant Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . . . (1B) . . . . (2) The 4[Central Excise Officer] shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. 6.6 We find that much ado has been made by the appellant on the definite article the before the words Central Excise Officer . In English usage the is termed as the definite article while indefinite articles are a and an. A definite article only specifies that the noun referred to is one which is an already known one. What it is, must be identified by the context of the matter under consideration. For example, in the present context, while referring to Central Excise Officers in relation to an activity or duty, there are those officers who are empowered and have jurisdiction to undertake that activity and those that don t. The in this situation specifies that the officer is one who has jurisdiction in the matter. There is no ambiguity in the present case that the said officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The issue whether DGCEI officers who has been vested with the powers under the impugned Notification No.22/2014-S.T., dated 06.09.2014, are Central Excise Officers or not was examined by the Hon ble Madras High Court in M/S. Redington (India) Limited vs Principal Additional Director, Directorate General of Goods and Services Tax, Chennai [2022 (62) GSTL 406 (Mad)] dated 17/06/2022. The Hon ble Court held: 140. The Central Excise Officers were given the task to perform the functions under Chapter V of the Finance Act, 1994. It is the Central Excise Officers who can issue Show Cause Notice under Section 73 of the Finance Act, 1994 to an assessee where any service tax was not been levied or paid or was short-levied or short-paid or erroneously refunded. It is also the Central Excise Officer who can adjudicate such Show Cause Notice. 141. In fact, initially, when service tax was introduced, the power to issue Show Cause Notice under Section 73 of the Chapter V of the Finance Act, 1994 was vested only with the Assistant Commissioner of Central Excise / Deputy Commissioner of Central Excise. Later Section 73 was amended and the expression Assistant Commissioner of Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Rules, 2002. 154. Such officers may exercise the powers and discharge the duties conferred or imposed by or under the Act or these rules on any other Central Excise Officer who is subordinate to him 155. By virtue of Notification No.38/2001-C.E. (N.T), dated 26.06.2001 issued under Section 2(b) of the Central Excise Act, 1944 read with Rule 3(1) of the Central Excise (No.2) Rules, 2001, the Board appointed several persons as Central Excise Officers and invested them with all powers of an officer of Central Excise of the rank specified in the corresponding entry in column (3) of the Table to the Notification and that such powers being the powers of a Central Excise Officer conferred under the Act, to be exercised by them throughout the territory of India. ***** ***** ***** 189. Therefore, the reasoning of the Hon ble Supreme Court in Commissioner v. Sayed Ali 2011 (265) E.L.T. 17 (S.C.) and in Canon India Pvt Ltd Vs Commissioner, 2021 (376) E.L.T. 3 (S.C.) cannot be imported in the context of the Central Excise Act, 1944 and/or The Finance Act, 1944. 190. Therefore, without doubt, the officers from the Directorate are Central Excise Officers as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise Officer and it is mentioned therein that any Officer of the Central Excise Department or any person who has been invested by the Board with any of the powers of the Central Excise Officer would be a Central Excise Officer. Thus, the Board has power to invest any Central Excise Officer or any other Officer with powers of Central Excise Officer. By virtue of Section 37B the Board can issue orders, instructions or directions to the Central Excise Officers and such Officers must follow such orders, instructions or directions of the Board. The Hon ble Supreme Court held that the Board can only issue such direction as is necessary for the purpose of and in furtherance of the provisions of the Act. The instructions issued by the Board have to be within the four corners of the Act. If, therefore, the Act vests in the Central Excise Officers jurisdiction to issue show-cause-notices and to adjudicate, the Board has no power to cut down that jurisdiction. However, for the purposes of better administration of levy and collection of duty and for purpose of classification of goods the Board may issue directions allocating certain types of works to certain Officers or classes of Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Mining service for a better understanding of the issues involved. Para 24.6 of the impugned order is hence reproduced below: 24.6. As regards Mining Services, as per Section 65(105) (zzzy), prior to 01.07.2012, 'Taxable Service' means, any service provided or to be provided to any person, by any other person in relation to mining of mineral, oil or gas. Further, Section 2 (11) of Mines Act, 1952 defines the term 'Minerals' as All substances which can be obtained from the earth by mining, digging, dredging, hydraulicing, quarrying or by any other operation and includes mineral oils (which in turn include natural gas and petroleum) . Section 3 of 'The Mines and Minerals (Development and Regulation) Act, 1957 (herein after referred to as 'MMDRA, 1957 for short) defines the terms mining operation, minerals, mining lease etc. and the same is reproduced below for ease of reference: In this act, unless the context otherwise requires:- (a) Minerals includes all minerals except mineral oils, (b) Mineral Oll includes natural gas and petroleum, (c) Mining lease means lease granted for the purpose of undertaking mining operations, and includes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the state governments. These regulatory powers over minor minerals do not hinder the levy of service tax on taxable activities in relation to mining under FA 1994. 7.3.1 The activity as under taken by the appellant is, quarrying/ earth work excavating of sand and wet sand and loading in the lorries/ tippers of the consumer using their own labourers. As per Section 3 of 'The Mines and Minerals (Development and Regulation) Act, 1957, Mining Operations means any operation undertaken for the purpose of winning any mineral. We find that sand quarrying as a service activity in general (not exhaustive) includes: 1. Exploration and planning : This stage involves identifying suitable sand deposits, obtaining the necessary permits, and developing a quarrying plan. 2. Site preparation : This stage involves clearing the land, removing topsoil, and constructing access roads and other infrastructure. 3. Extraction: This stage involves removing the sand from the ground. This can be done using a variety of methods, including: Surface mining: This method is used when the sand deposit is close to the surface. Heavy machinery, such as excavators and bulldozers, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate Bench of this Tribunal held: 5.3 In respect of one of the contracts, we notice that the same relates to mining of sand from the riverbed and transporting the same to the Western Coalfield s mining area. Sand is a minor mineral and therefore, mining of sand from riverbed comes within the definition of mining service and will not come within the scope of Cargo Handing Service as the main activities is of mining and therefore, demand of Service Tax on mining of sand is not sustainable in law. Even if the State Government is the owner of the mineral deposits in the lands which vest in the state, it will not be immune to the tax which is imposed by the Center as will be discussed later. In relation to mining alone is taxable. 7.4 The appellant has taken an alternate plea that the wording in relation to used in the definition of mining service is relevant, (i.e.) the activity in relation to mining alone is taxable and not mining per se. Hence activities in relation to mining is chargeable to tax but not mining. The Division Bench of the Hon ble Delhi High Court in Home Solutions Retails (India) Ltd. Vs Union of India Ors. [WP(C) No.3398/2010 dated 23/09/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution exempts the property and income of a State from Union taxation. In re. The Bill to Amend the Sea Customs Act (1878), [1963 AIR 1760/ 1964 SCR (3) 787] pertaining to indirect taxation, a Special Bench of eight judges of the Hon ble Apex Court exercising its advisory jurisdiction decided on whether the provisions of Art. 289 of the Constitution precluded the Union from imposing, or authorising the imposition of (a) Customs duties on the import or export or (b) excise duties on the production or manufacture in India of the property of a State used for purposes other than those specified in cl. (2). of that Article. In a majority decision the Hon ble Chief Justice speaking for himself and four other Judges held that the immunity granted to the States in respect of Union taxation, under Art. 289(1) does not extend to duties of customs including export duties or duties of excise. Relevant portions of the judgment are extracted below: 11. It will thus appear that both s. 154 and Art. 285 set out above speak only of property and lay down that property vested in the Unions shall be exempt from all taxes imposed by a State or by any authority within a State, subject to one exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding goods out of the country to other lands. It is not a duty on property in the sense of Art. 289(1). Though the expression taxation , as defined in Art. 366(28), includes the imposition of any tax or impost, whether general or local or special , the amplitude of that definition has to be cut down if the context otherwise so requires. The position is that whereas the Union Parliament has been vested with exclusive power to regulate trade and commerce, both foreign and inter-State (Entries 41 and 42) and with the sole responsibility of imposing export and import duties and duties of excise, with a view to regulating trade and commerce and raising revenue, an exception has been engrafted in Art. 289(1) in favour of the States, granting them immunity from certain kinds of Union taxation. It, therefore, becomes necessary so to construe the provisions of the Constitution as to give full effect to both, as far as may be. If it is held that the States are exempt from all taxation in respect of their export or imports, it is not difficult to imagine a situation where a State might import or export all varieties of things and thus nullify to a large extent the exclusive power of Parliam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repeatedly said by this Court that it is not safe to pronounce on the provisions of one Act with reference to decisions dealing with other Acts which may not be in pari materia. Hence we need to examine the matter in detail on merits in the context of FA 1994. 7.7 In the pre-Service Tax regime while the Center was empowered to tax goods up to the production / manufacture stage, the States had the power to tax the sale of goods. The Center introduced a new Article 268A in the Constitution in the year 2003 by Constitution (Eighty-eighth Amendment) Act, 2003 which provides that taxes on services shall be charged by Union of India. The Hon ble Supreme Court in Union of India Vs Intercontinental Consultants and Technocrats Pvt. Ltd [2018 (10) G.S.T.L. 401 (S.C.)] held as under: 17. As stated above, the source of the concept of service tax lies in economics. It is an economic concept. It has evolved on account of Service Industry becoming a major contributor to the GDP of an economy, particularly knowledge-based economy. With the enactment of Finance Act, 1994, the Central Government derived its authority from the residuary Entry 97 of the Union List for levying tax on servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner. It was held: The central thrust of the Petitioners' argument is that Parliament lacks the legislative competence to enact the said amendments since the activity manufacture of alcoholic liquor for consumption, whether for oneself another person, lies exclusively within the domain of the State under Entry 51 of List II of Schedule VII to the Constitution. The case of the Respondents on the other hand is that service tax introduced by Chapter V to the FA 1994 is within the legislative competence Parliament to levy and collect. The topic of legislation is sought to be traced to the residual Entry 97 of List I of the VII Schedule to the Constitution. The Respondents contend that service tax is not levied on the manufacture alcohol but on the service aspect of the contract of manufacturing on behalf of the principal manufacturer/brand owner. For the reasons follow, this Court agrees with the Respondents and rejects the raised by the Petitioners. (emphasis added) The Hon ble Court distinguished between manufacture and the service aspect of manufacture. This being so, the appellants contention that quarrying of sand may be considered as production of excisable good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is rendered to the customer / client. Thus, the taxable event is each exercise / activity undertaken by the service provider and each time service tax gets attracted. Hence it is possible to distinguish service tax from VAT. This satisfies the law that one transaction can be either a service or a sale hence both VAT and Service Tax cannot be levied on the same transaction, in the impugned case also. In the instant case as per the statement of Shri M Palaniswamy (appellant) dated 22/01/2015 he has not paid VAT/ sales Tax on the service charges amount received from CPWD since no sales of goods were involved. The statement has not been retracted. This fact of non-payment of VAT / Sales Tax has also been confirmed by PWD as stated at para 7 of the SCN dated 09/10/2015 itself. Since the appellant is only rendering service in relation to the mining of sand and no sale of sand is done by him requiring payment of sales tax / VAT, the appellant s plea fails. The appellants services are covered under works contract 7.8 In the case of quarrying of sand, PWD provided works contract service to WRD, Department of Govt. of Tamil Nadu/ District Collector and hence as sub-contractors they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No.39: 39. Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution. as amended by Notification No. 22/2016-Service Tax dated 13/04/2016 by which the following entry among others was inserted: 60. Services by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution; PWD are doing the statutory functions as defined by statue which were covered under 243 W/243G of The Constitution and hence the activity of PWD is outside scope of service / exempted. The appellant has highlighted the following activities related to the 12th Schedule under Article 243W; 1) Urban planning including town planning 2) Planning for economic and social development 3) Urban poverty alleviation 4) Provision of urban amenities and the following activities related to the 11th Schedule under Article 243G: 5) land development, implementation of land reforms, land consolidation and soil conservation 6) Minor irrigation, water management and watershed development 7) R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of hiring. leasing, licensing or in any such manner without transfer of right to use such goods was a declared service. Their transactions were deemed sales defined in Article 366(29A) of the Constitution and hence it will not attract service tax. 8.2 The Apex court in its judgment Rashtriya Ispat Nigam Ltd. vs Commercial Tax Officer [[1990] 77 STC 182 AP] has discussed the issue regarding transfer of a right . The relevant portion is extracted below. 5. An owner of property has a bundle of rights in it, namely, right to possess, right to use and enjoy, right to usufruct, right to consume, to destroy, to alienate or transfer, etc. In law it is not only possible but also permissible that the various rights and interest may be vested in various persons. While remaining the owner of a property, a person may create a charge on the property, mortgage it or lease it. In the transaction of sale, all the rights of the owner are transferred to the purchaser and it is said that the property in the goods passes to the purchaser. In a lease of immovable property, there is a transfer of a right to enjoy such property; a lease of land and a bailment of chattels are transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... economic benefits of property which results in terminating rights and other relations in one entity and creating them in another. While construing the word transfer due regard must be had to the thing to be transferred. A transfer of the right to use the goods necessarily involves delivery of possession by the transferor to the transferee. Delivery of possession of a thing must be distinguished from its custody. It is not uncommon to find the transferee of goods in possession while transferor is having custody. When a taxi cab is hired under rent-a-car scheme, and a cab is provided, usually driver accompanies the cab; there the driver will have the custody of the car though the hirer will have the possession and effective control of the cab. This may be contrasted with the case when a taxi car is hired for going from one place to another. There the driver will have both the custody as well as possession; what is provided is service on hire. In the former case, there was effective control of the hirer (transferee) on the cab whereas in the latter case it is lacking. We may have many examples to indicate this difference. 10. Whether there is a transfer of the right to use o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... let the lorries to anybody in any form whatsoever. 8. The Second party shall not make any additions or alterations in the lorries. Insurance including third party insurance shall be at the cost of the First party and so also the Annual Road Tax/Vehicle License, fitness certificate required to be obtained under the Motor Vehicles Act, 1988. However Insurance on the goods including transit insurance shall be at the cost of the Second Party. 9. The Second Party will permit the First Party and his agents to enter into the lorries at all reasonable times and at various road points, after due notice is given to the Second Party for the purpose either of inspection / or repairs of the said lorries. 10. At the expiry of the lease the Second Party shall handover possession of the Lorries to the First party with all the fittings and fixtures intact and in working order, except reasonable wear and tear. 11. That all the rules, laws and by-laws of the Motor Vehicles Act 1988, Sale of Goods Act, 1930 or Police any other local law over the usage of lorries shall be complied with by the Second Party, Second Party shall be liable to the default of the Second Party in observing the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above satisfied these conditions. However, it is seen from paras 7 and 12 of the contract above that the transferee i.e. the Second party shall not sublet the lorries to anybody in any form whatsoever and at para 12 that no, part of the lorry or right in lorry is transferred nor any second party is entitled to avail any credit facility from any bank or financial institution or third party. 8.6 A question arises whether effective control by the transferee includes the power to sell, lease, mortgage, or dispose of the goods as the transferee sees fit. Sale entails that the permanent title of the property along with a complete bundle of rights gets transferred by the owner or his representative to a buyer, whereas in tangible goods service there is a limited transfer of right and no permanent transfer of property. In a deemed sale the ownership of tangible goods does not change permanently. In other words, the power to sell, lease, mortgage or dispose of the lorry is bundled with the right to title and its transfer is felt to be not necessary in determining effective control of the transferee over the lorry in the impugned situation. In Indus Tower Ltd Vs Deputy Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Service Tax, Ahmedabad Vs M/s Adani Gas Ltd. [Civil Appeal No. 2633 of 2020] has examined the law pertaining to supply of tangible goods and has laid out the test for determining whether a taxable service of supply of tangible goods has occurred. It stated as under: 13. Section 65(105)(zzzzj) of the Finance Act 1994 provides for taxability of supply of tangible goods for use, without transferring right of possession and effective control over such goods, as a taxable service . Section 65(105)(zzzzj) of the Finance Act, 1994 reads as follows: 65(105) taxable service means any service provided or to be providedxx xx xx (zzzzj) to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances. 14 Section 65(105)(zzzzj) of the Finance Act 1994 was introduced by Notification No.18/2008-S.T. with effect from 16 May 2008. Section 65(105)(zzzzj) levies a service tax on the use of tangible goods. On the other hand, the transfer of the right to use any goods is treated as a deemed sale and is subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rruption or disturbance during the terms of the agreement. Although the appellant takes care of major repairs, pays for insurance of the vehicle including third party insurance and has the right to inspect the vehicle, the agreement indicates that full control of the lorry had been given to the second party to use the lorry exclusively during the validity of the agreement. The impugned order has noted that there is a duality of control, and the transferee has no rights which are to the exclusion of the transferor. It must be understood that the whole concept is of a deemed sale. The actual ownership of the lorry continues to be that of the appellant and in this situation, he must undertake certain statutory obligations. This cannot be understood as duality of control. The transfer of right to use of the lorry in this case involves transfer of both possession and control of the vehicle to the second party for a definite period as per the contract while the title for the goods remains with the appellant. The second party has to employ his own staff and is not hindered in putting the vehicle to his use as desired. Fuel, minor repairs, goods transit insurance are all borne by him (seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be drawn against the assessee, if he failed to put before the Department, material which, he was in exclusive possession. This process is described in the law of evidence as shifting of the onus in the course of a proceeding from one party to the other. Hence in those cases where the appellant was unable to produce a contract for supply of vehicles or to prove its terms, despite being asked to do so they have not shown that effective control of the vehicle was transferred to the transferee and the appellant would be liable to pay duty along with interest under the taxable service of supply of tangible goods. Therefore, for re-working out the correct demand, the cases has to go back to the Original Authority. The duty may be worked out by bifurcating the demand made on the value of supply of vehicles covered by Agreement / contract and amounts received for supply of vehicles without an agreement/contract, by the department and informed to the appellant who shall pay the same for supply of vehicles without a contract including those leased out to TAMIN. 9. Site formation clearance excavation, earthmoving and demolition services. 9.1. The appellant has stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being in force. 9.3 It appears from the depositions made by Shri. M. Pradeep, Senior Manager (F A) of M/s. GVR Infra Projects Ltd., Chennai in his statement recorded on 24.02.2015, Shri. V.Srinivasan, Accountant, M/s. NAPC Ltd., Chennai in his statement recorded on 30.01.2015 and Shri. K. Pattabiraman, Assistant Manager (Indirect Taxes), M/s. Larsen Toubro Ltd., Chennai in his statement recorded on 27.01.2015 that Shri. M. Palanisamy provided services such as jungle clearance, earth formation, earthmoving, solving of local problems, getting required permission for all concerned departments, transportation of materials from borrow area to work site by utilizing his vehicles Tipper and Taurus and also supply of required manpower for the completion of such services. 9.4 The appellant has prayed for considering exemption for their activity under Notification No. 25/2012 dated 20/06/2012 at Sl. No. 13. The said Sl. No. reads: 13. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (a) a road, bridge, tunnel, or terminal for road transportation for use by gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rranted. In the present case, the period covered by the impugned order is from 2010 to 2015. The Show Cause Notice is dated 9.10.2015. Therefore, the maximum period upto which the demand can be imposed is only till October 2013 and the demand from 2010 to October 2013 merits to be set aside. There was never a suppression of facts to the department. Audit has been conducting periodical verification of accounts during the alleged period. They have been filing ST-3 returns and TR6 forms regularly in which they have disclosed all requisite information. Therefore, the extended period cannot be invoked. They have relied on the following judgments in their favour:- a. Scott Wilson Kirkpatrick (I) Pvt. Ltd. Vs. CST 2007 (5) STR 118 (Tri. Bang.) b. CCE Vs. Spiced Communication (P) Ltd. 2006 (4) STR 74 (Tri. Del.) c. CCE Vs. Umakanth Co. 2008 (9) STR 527 (Tri. Bang.) d. BPL Ltd. Vs. CST 2006 (4) STR 307 (Tri. Bang.) e. India Colour Lab Vs. CCE 2006 (3) STR 180 (Tri. Del.) Further as per the Hon'ble Supreme Court the burden of proving any form of malafides lies on the shoulder of one alleges it. There is no positive act of suppression on the side of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered a host of services without informing about these activities to the department through the statutory returns being filed by them or otherwise. They have been awarded with the contract of quarrying of sand and loading the same onto customers vehicles using their own labourers for the past 12 years. In the Statement of Facts (SOF) of their appeal, they admit to owning 1000 Numbers Trucks and 300 Number Poclains . The SOF notes that the investigation alleges that no written agreements were executed by them for the hiring of the trucks/ proclaim and that the hire charges were calculated on an hourly basis agreed upon over the phone. The customers who hire these vehicles for use in transportation of goods, state that the charges are paid to the appellant in cash through his agents. The SCN note that the appellant did not issue bills/invoice/vouchers to PWD Department for receiving service charges for the services rendered to them. The service charges are paid by PWD based on the works completion details recorded in Measurement Book (M Book) maintained by PWD. In the instant case as per the statement of Shri M Palaniswamy (appellant) dated 22/01/2015 he has not paid VAT/ sales T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation of law involved. The question regarding the adjudication by the Commissioner on a SCN issued by the Additional Director General DGGI does not have a bearing on their nonpayment of tax. Similarly, their plea that no tax is payable on mining activity, is also not correct. Relevant statutory provision admits no ambiguity. The grammatical meaning of the taxing provision is in conformity with its legal meaning. Having had the experience of 12 years in the field and when they did not pay sales tax / VAT they should have paid Service tax or sought clarification from the department on the matter. Raising numerous, and at times contradictory, pleas does not mean that there was a substantial interpretation of law involved. Hence there is no reasonable cause involved to invoke the benefit of Section 80 of the FA 1994. The judgments in Star Neon Singh; Flyingman Air Courier; ETA Engineering Ltd. and Medpro Pharma Pvt. Ltd. (supra) do not come to their help. Hence no reasonable cause has been made out and the penal provision of section 77 (1) and 78 of the FA 1994 has been rightly invoked. The impugned order has not made out a case for imposition of penalty under section 77 (2) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a majority decision in re. The Bill to Amend the Sea Customs Act (1878), (supra) the Hon ble Chief Justice speaking for himself and four other Judges held that the immunity granted to the States in respect of Union taxation, under Art. 289(1) does not extend to duties of customs including export duties or duties of excise. The ratio of this judgment would also be applicable to an indirect tax like service tax which is a later levy. F. Where goods are specified in the schedule to the Central Excise Act, I944, they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the assessee. G. Mere selective processing of goods by quarrying / earth work / excavating of sand and wet sand and loading in the lorries / tippers of the consumer cannot be called as production or manufacture of goods. No new identifiable goods have come into existence in the process to say that production has taken place. H. The appellant is only rendering service in relation to the mining of sand and no sale of sand is done by him requiring payment of sales tax / VAT, I. If a contract is primarily a contract of work and labour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y involve formation of roads. O. Services provided to NAPC, L T and GVR etc. will not get the benefit of exemption meant for governmental authority as the taxable service is not provided by the appellant to Government, a local authority or a governmental authority. P. There is a positive act of suppression on the side of the appellant showing willful suppression on their part. Hence suppression of information with intention to evade payment of duty is established. In this era of self-assessment, the facts would not have been revealed had investigations into the appellants activities not been initiated by the officers of DGCEI. Q. As per the Hon ble Supreme Court's judgment in Commissioner of Central Excise, Pune Vs M/s SKF India [2009-TIOL-82-SC-CX] interest is leviable on delayed or deferred payment of duty for whatever reasons. R. The Supreme Court, in its decision in UOI Vs. Dharmendra Textile Processors (2008 (231) ELT-3), held that a section prescribing mandatory penalty should be read as penalty for a statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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